"Just because a case is different or outside of the norm, doesn’t mean it’s a bad risk to take or shouldn’t be lent on"
FSE Glasgow is currently underway and during a session titled 'Both sides of the coin: specialist lending from a broker and lender perspective' Alistair Ewing and Neil Molyneux explored what they called specialist lending’s ‘image problem’.
Alistair, who is Managing Director of master broker The Lending Channel, and Neil, Head of Sales at Masthaven Bank, spoke at the Scottish event this morning covering topics from second charge to development finance.
Both speakers agreed that specialist lending is potentially misunderstood by some, with Ewing noting that the term itself wasn’t clearly defined, leading to some viewing the market as one which caters solely to consumers with adverse credit.
“Is specialist lending the correct term?”, Ewing asked, “Is it complex lending, is it lending on anything that’s not residential, is it just what a broker can’t work out where to place?”
Molyneux added: “Just because a case is different or outside of the norm, doesn’t mean it’s a bad risk to take or shouldn’t be lent on.”
When asked whether more needed to be done to signpost specialist lending to consumers, both speakers agreed that this was the broker’s responsibility.
“Specialist lending isn’t a term that consumers use,” Molyneux noted, “it’s a term that we as professionals use. The customer just wants to buy their property or get their case through that a high street lender won’t lend on. It’s up to you as brokers to know where it needs to go and use your expertise to place that case, or to know when you need to look to a master broker.”
Ewing added, “As a master broker, or packager, if a consumer can get direct finance that’s fair enough. It’s when they can’t, and they seek a broker’s help, it’s because they don’t know where to go to place that 40-property portfolio. That’s when we need to step in and use our knowledge of the market, and that’s where packagers come in to make that easier for the broker.”
Looking at the short term lending market, both speakers agreed the marketplace was in a positive position.
Molyneux said: “The marketplace is stabilising, interest rates are settling, and it’s calming down – lenders are now looking to specialise and simplify how they lend, which is making for a much more accessible market. For example, instead of having criteria for heavy refurb and development finance, they’re now defining specific ranges for criteria and it means clients are getting the best possible products and pricing specific to what they need.”
On second charge, Ewing said that “the only way is up for seconds” – noting that:
“There are sub 4% rates, you can get products up to 95% loan to value, loan sizes are varied which is good for clients – good second charge products are out there for the right clients.”
He noted, however, that there was still a perception that second charge is solely aimed at adverse clients and that brokers needed to be aware that this wasn’t the case.
He concluded: “It’s not just for adverse – it’s for bespoke cases, it’s for self employed borrowers looking to pay their tax bills, it’s for property deals. A standard mortgage might look like the obvious choice but a second charge could well be a better option. And while the market is a fraction of the residential market, there’s room for huge growth.”